An American stock market researcher named Eugene Fama, who apparently had too much time on his hands, devised the efficient market hypothesis (EMH), which concluded that stocks are always correctly priced since everything that is public knowledge is reflected in the market prices. Some people actually buy into this hogwash.

I have another theory. It’s the crazed investor syndrome (CIS) that says the market is inefficient, mentally unstable and sorely in need of an analyst (and we’re not talking research analyst here).

All around us these days investors are playing the stock market like Las Vegas.

Take note, Mr. Fama.

As I write this, people are actually buying stock in Air Canada (AC-TSX). This, after the announcement that shares in the company, which has been operating under creditor protection, are on the verge of being delisted.

Raymond James analyst and humanitarian Ben Cherniavsky was kind enough to slap a target price of $0.00 on Air Canada in June, but not everyone caught the hint. The shares continued to trade over a dollar in June and July, and even with the news of the delisting, it was last seen trading at 21.5 cents. This is nuts.

People have been actually falling back in love with Nortel Networks (NT-TSX), a disgraced company that faces a criminal investigation by the RCMP over its accounting practices. If you want to help Nortel, buy the company an adding machine for Christmas.

After Nortel recently released “estimated” first- half financial results ($5.1 billion revenue) and said it was cutting 3,500 jobs and refocusing operations, investors (for lack of a better word) gave the stock an immediate 10-per-cent boost and four-per-cent gain on the day of the news.

Meanwhile, investigations into Nortel’s accounting by the RCMP, the Ontario Securities Commission and the U.S. Securities and Exchange Commission continue, leading one to believe that there may be more bombshells dropped in the laps of shareholders.

Yet, Nortel remains the most high-profile stock in Canada, routinely leading the TSX in volume, and on the day of its news outmuscled rock-solid oil and gas companies such as EnCana (ECA-TSX) and Canadian Natural Resources (CNQ-TSX) with oil prices in the stratosphere. This is nuts.

Meanwhile, many companies with credibility, real earnings, real financial results (as opposed to estimated results) and no criminal investigations go virtually ignored by the market.

The market’s silliness has inspired small-cap guru Danny Deadlock to pen a lively rant to subscribers of his Microcap.com online newsletter. Wrote Deadlock: “We are following a company like VNWI (VIA Net.Works, VNWI-Nasdaq) with no debt, millions in the bank, over $100 million in U.S. revenue and it hits a new 52-week low. The value on this stock is bizarre, yet people pump millions and millions into the Titanic (Air Canada) at the same time the iceberg is ripping its side open.”

Of course, gross market inefficiency is what makes the stock market the great game it is.

* GOOGLE WON’T TELL: Even a search at mighty Google has failed to track down a proper explanation for the embarrassing and confusing false start that occurred when the search- engine giant launched on Nasdaq (GOOG).

Traders poised to jump into the much-hyped initial public offering (IPO) were thrown for a loop when the stock showed its first trade of 350 shares at a heart-stopping $135.91 US, a 60-per-cent premium to the IPO price of $85.

Just imagine if you’d booked a market trade and thought you’d had a fill at that price!

Then, to add insult to injury, it showed a second trade at $140.91 moments later.

Initially, a frazzled reporter with CNBC pronounced that the stock opened at $135.91, but said they were checking to see if that number was correct. Minutes later, Nasdaq announced it was halting trading.

When the shares finally opened again a few minutes later, this time for real, the opening price was $100.01, but there wasn’t much of an opportunity for traders with the shares trading in a tight 10-per-cent range on opening day.

A Nasdaq spokesman said a broker prematurely dealt shares during the quotes-only period prior to opening, but didn’t initially offer any other details for the blunder that must have dissuaded numerous investors from entering positions at the outset.

Many short-sellers are betting that once the Google hype dies down, the stock will tumble to the $85 IPO price or even lower, particularly if tech stocks remain out of favour.

* TO SHORT OR NOT TO SHORT: That is the burning question as crude oil prices break new barriers on an almost daily basis.

Richard Russell, editor of the popular Dow Theory Letters, recently cautioned investors against shorting oil (betting on the price to drop). Russell projects oil to hit $55 U.S. per barrel on its current run based on his technical charts.

“If oil does reach $50, I think it’s going to frighten Wall Street,” writes Russell.

* TRADER’S LAMENT: You know this is a blasé market when a prominent trader begins touting Canadian investment trusts.

That’s exactly what Calgary pro trader Tyler Bollhorn did recently in featuring three trusts in his recent weekly letter to www.stockscores.com subscribers.

Bollhorn’s trio of trusts with “decent potential” to move up based on his market scan of stocks with favourable charts were Viking Energy Royalty Trust (VKR.UN-TSX), Fort Chicago Energy Partners (FCE.UN-TSX) and Retirement Residences Real Estate Investment Trust (RRR.UN-TSX).

* HOT STOCK: Riverside Forest Products RFP-TSX $30.94 Up $8.94 (+46.4%) on 324,100 shares (for week ending Aug. 27)

Let the Okanagan Takeover Games begin. Kelowna-based Riverside rejected a $29 takeover bid by private Vernon-based company Tolko Industries. Stock in Riverside soared well past the offer price as investors speculated the pot would be sweetened. Riverside said the Tolko pitch “significantly undervalued” the forestry company. We haven’t seen this much action in the Okanagan since Ogopogo last stuck its head out of the water.

* COLD STOCK: Metallic Ventures Gold MVG-TSX $1.73 Down 42 cents (-19.5%) on 1.7 million shares (for week ending Aug. 27)

Investors thought they’d hit the royal flush with Reno-based Metallic last year as the stock cruised to $9.60, but this speculative play has turned into a bad casino nightmare for many. Problems at Metallic’s Nevada mines have led shareholders to cash in their chips while the company explores whether continuing its operations make sense economically.

(Gyle Konotopetz can be reached at gyle@businessedge.ca)